Closure of the Strait of Hormuz Sends Oil Prices Higher — Why?

Geopolitical tensions in the Persian Gulf have again unsettled global energy markets. Drone strikes on Saudi Arabia’s largest refinery, disruptions to Qatar’s LNG facilities, and tankers held in Gulf waters have raised serious concerns about world energy supply. In such circumstances, market attention quickly centers on a critical chokepoint: the Strait of Hormuz.

According to a report by OilPrice.com dated 3 March 2026, oil prices surged sharply. West Texas Intermediate (WTI) for April 2026 rose to 77.00 US dollars per barrel, up 8.10 percent. Brent for May 2026 touched 83.65 dollars, up 7.60 percent. LNG also rose significantly. It was reported that there was no crude oil or LNG transiting the Strait of Hormuz on 2–3 March, with 55 fully laden Very Large Crude Carrier (VLCC) tankers detained in the Persian Gulf.

These price surges show how sensitive global energy markets are to disruptions along this route. The Strait of Hormuz is not merely a narrow waterway; it is a central hub for the distribution of oil and gas globally. When access is disrupted, the impact is felt directly in prices worldwide.

What is the Strait of Hormuz?

The Strait of Hormuz is a sea passage linking the Persian Gulf with the Gulf of Oman and the Arabian Sea. Geographically, it separates Iran to the north from Oman to the south, specifically the Musandam region. Its width ranges from 55 to 95 kilometres, with the narrowest point located between Iran’s Larak Island and Oman’s Great Quoin.

According to the U.S. Energy Information Administration (EIA), in 2024, on average 20 million barrels of oil passed through this strait per day. That figure is around 20 percent of global petroleum liquids consumption. In addition, about one-fifth of the world’s LNG trade also transits this route, particularly from Qatar.

Britannica identifies the Strait of Hormuz as one of the world’s most important oil chokepoints, on a par with the Malacca Strait. A chokepoint is a narrow route that becomes a crucial node in global trade. If disrupted, supplies can be delayed and logistics costs rise sharply.

Traffic through the strait accounts for more than a quarter of global seaborne oil trade. Around 84 percent of the oil and 83 percent of LNG that pass through Hormuz in 2024 headed to Asian markets, notably China, India, Japan, and South Korea. This means the stability of this strait largely determines global energy price stability.

History of the Strait of Hormuz

For centuries, the Strait of Hormuz has been a vital gateway between East and West. The route connects the resource‑rich Persian Gulf with the Indian Ocean and trade routes of South and East Asia. Its geographic position makes it a strategic distribution hub for commodities, from spices in classical times to crude oil in modern times.

In modern geopolitics, the strait gained even greater importance after the 1979 Iranian Revolution. Since then, relations between Iran and the United States have often heated up, and the Strait of Hormuz has become a stage for military display. In the 1980s, tanker wars during the Iran–Iraq conflict showed how commercial ships could become targets.

A publication titled Geopolitical Dynamics of Maritime Security in the Strait of Hormuz by Hasna Moraina Rizkiyani et al explains that the region sits at the confluence of Iran and Oman’s territorial waters. Depths are largely over 100 metres along the main shipping lane, enough for giant tankers. Yet, because the waterway is narrow and busy, the strait remains vulnerable to security disturbances.

In the book The Principles of Sun Tzu in Naval Doctrine by Aris Sarjito, the Strait of Hormuz is described as the most vital strategic chokepoint in the world. About 20 percent of global oil trade passes through this route. Attacking its weak points could exert substantial economic pressure on both oil-exporting and oil-importing nations. Past tanker seizures have repeatedly triggered spikes in global oil prices.

While Iran geographically has the capability to disrupt shipping, various analyses, including those from Oxford, argue that a total closure would be difficult to sustain in the long term due to swift international response and immense global interests.

Closure of the Strait and Oil Price Surges

The immediate impact is a surge in prices. OilPrice notes that the Israel–US–Iran conflict pushed oil prices up by around $10 per barrel in a short period. LNG jumped by up to $15 per MMBtu. Freight rates for VLCCs on the Gulf–China route rose by up to 560 percent since the start of January.

The disruption does not only affect crude. Derivatives such as diesel, aviation fuel, and naphtha also rose. S&P Global Platts even halted some Middle East oil price assessments due to shipping uncertainty.

There are alternative routes. Saudi Arabia has the East–West pipeline with a capacity of around 5 million barrels per day to the Red Sea. The United Arab Emirates has a 1.8 million bpd pipeline to Fujairah. However, available spare capacity is estimated at around 2.6 million bpd, far smaller than the roughly 20 million bpd that normally pass through Hormuz.

Oxford projects several scenarios. Partial disruption reducing ship traffic by 50 percent for two months could trim global supply by about 4 million bpd. In an extreme scenario, if transit were halted for a week, oil prices could surge to $140 per barrel and gas prices could exceed $40 per MMBtu.

Because oil is a globally traded commodity with inelastic pricing, even small disruptions are enough to push prices higher. When the Strait is closed or even threatened, markets promptly price in potential shortages. That is why closure of the Strait of Hormuz is almost always associated with spikes in world oil prices and rising global economic uncertainty.

This article was written by Shakti Brammaditto Widya Fachrezzy, participant.